Why Data, Rationality and Planning Ahead Are so Important for Property Investment

As humans, we often do a pretty terrible job of predicting the future. We bet big on things that blow up in our faces and don’t think about how actions, like smoking or slouching in our chair, will hurt us in the long-term. This is especially true when it comes to property investment.

On the latest episode of Get Invested, I spoke to Doron Peleg. Doron is CEO of RiskWise Property Research, a company that uses data and algorithms to perform risk assessments on some of Australia’s hottest property markets.

Doron is a planner by nature, he told me. While not everybody needs to be as meticulous as he is, Doron did explain that property investors in Australia tend to forego planning for impulse investments. They see “hot” neighbourhoods and jump on without much consideration for the future.

Doron and his team of RiskWise are doing their best to fight against this school of “buy it while it’s hot” investment. They are not alone, as data-backed investments have become increasingly popular over the last few years.

“Big data is making the commercial real estate industry more transparent,” Ely Razin, CEO of CrediFi, a big data platform for the commercial real estate finance market, told CNBC in 2015. “It becomes a partner to the players to the community, whether they’re brokers, lenders, investors or owners.

The benefits of data are limitless. Investors can use data to see how physically sound a property is, its renovation history and the financial integrity of the owner. Unfortunately, most of our listeners don’t have expertise in data science. While you can certainly use Google to look up a suburb’s performance history over the past few years, this sort of backwards-looking can be dangerous. What you want to do is use data experts to make healthy predictions about the future. Old data helps, but only looking at it can be incredibly misleading and incur tunnel vision.

Focusing on the here and now can be dangerous. This kind of thinking leads us to smoke cigarettes, eat unhealthy food and buy things that offer no value. While a little bit of vice and impulsiveness might be okay, your wealth is not something you want to play around with.

Listen to my entire conversation with Doron here.

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